What is a Revocable (or living) Trust?

A revocable, sometimes called "living," trust is a type of trust that is completely revocable or amendable by its creator (usually called the "grantor" or "settlor") during the grantor's life. The trust becomes irrevocable upon the death of the grantor.

During the life of the grantor, the assets of the trust can be used by the grantor as he or she has always used such assets. The grantor can continue to spend any liquid assets placed in the trust and can continue to live in any residences placed in the trust. It is upon the death of the grantor that the benefits of a revocable trust are realized.

A revocable trust allows the assets in the trust to avoid the probate process and the fees, both to the court and to attorneys, that go along with the probate process. However, it is important to note that the trust allows the grantor's assets to avoid probate only to the extent the assets are placed in the revocable trust before the death of the grantor. It is possible with a completely funded revocable trust (one in which all of the grantor's assets are placed in the trust before the grantor's death), to avoid the probate process alltogether.

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Revocable trusts are typically used in connection with a "pourover" will - a will in which all of the decedent's assets are directed to be distributed to the revocable trust upon the death of the trust's grantor. In such a scenario, the revocable trust contains the substantive dispotive provisions of the estate plan. The diagram below shows how this process works.

An often-overlooked step in preparing a revocable trust is funding the revocable trust. Funding a revocable trust during the grantor's life allows the assets to avoid probate and the associated fees. In order to fund a revocable trust, bank accounts should be retitiled in the name of the trustee, partnership interests, LLC interests, and corporate stock should be assigned to the revocable trust, and deeds should be prepared transferring the real property to the trust.

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